|
|
Our NewsletterIssue No. 47: Major Problems With the International Pricing Index
In a speech on Oct. 25, President Trump criticized pharmaceutical companies for having “rigged the system” by charging higher prices in the U.S. than abroad. In fact, the system-riggers are not drug firms but foreign countries. Nearly all of them operate nationalized health care systems, where prices are set -- and access to medicines determined -- by government agencies. This is the system that Americans have consistently rejected and one that, according to a new study, would wreak havoc on pharmaceutical innovation, yet a Republican Administration wants to import a key portion of it to the United States. There is another approach, however, to closing the disparity – one that would seem better suited to President Trump’s own style and political philosophy. It is for the White House to exert pressure on the Europeans, Canadians, and others, mainly through trade agreements, to end their own price controls and stop their free-riding. Importing Price Controls Drug companies would like nothing better than to insert some equity into what American and patients in other countries are paying for drugs, but they can’t without the help of their own government. Most foreign nations run monopsony drug purchasing operations; in other words, government agencies are the only purchaser of pharmaceuticals. The result, as the President said, is that “American consumers…subsidize lower prices in foreign countries through higher prices in our country.” The gap is real, but is the best way to narrow it what the Administration is advocating? A few days after the President gave his speech, the Centers for Medicare and Medicaid Services (CMS), an agency of the U.S. Department of Health and Human Services (HHS), proposed a rulemaking that would create an International Pricing Index (IPI) Model. If it goes into effect, the IPI would establish drug price controls based on an index of what other countries pay. The index would apply to single-source drugs and biologicals in Medicare Part B, which reimburses for physician-administered treatments, such as infusions of cancer medicines. In other words, for some of the most innovative and sophisticated treatments, the U.S. will be adopting a critical component of foreign nationalized health care systems. While that component is limited, it is a classic foot in the door, and according to new research, it will have immediate and detrimental consequences. Price controls have had a devastating effect on the pharmaceutical industry outside the United States. Not only will fewer drugs be developed, but, if the U.S. adopts the European system, restrictions on access will surely follow. Of the 74 cancer drugs launched between 2011 and 2018, some 95% are available in the United States. “Compare that to 74% in the U.K., 49% in Japan, and 8% in Greece,” said the Wall Street Journal in an editorial last October. READ MORE HERE. |
What Others Are Saying"The anger directed at the pharmaceutical and biotech industries overall is misdirected. The single biggest driving force for increased health-care spending in the U.S. is the rising cost of labor, not drugs." "Even if pharmaceutical spending were rising as a share of total health care spending, but that rise was due to pharmaceutical investments driving down expenditures in other health care areas (e.g. a reduced need for more expensive surgeries), then it would still be inaccurate to argue that pharmaceutical spending is driving overall health care inflation." |